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Investment management firms are engaged in an ongoing quest to improve recruiting of specialized talent. To validate the critical importance of this goal, multiple surveys point to a consistently high percentage of financial services executives who view the current talent shortage as a threat to future growth (up to 70 percent of executives believe so). This means that only about one-third of these CEOs are confident about accessing the investment management talent that they need.
For those who think this is an over-exaggeration of the problem, one annual survey of global financial services CEOs reported that only 5 percent are confident they will be able to secure the required skillsets for their firms with new hires. The good news is that investment management CEOs who successfully overcome that challenge can take a swift and giant step ahead of most competitors.
Within an industry climate that thrives on growth, the leadership teams of investment management companies cannot afford to allow recruiting shortfalls to persist for an extended period of time. However, the lack of new talent has been widely reported on for several years. This suggests that the time is ripe to review the underlying challenges and solutions for investment management recruiting.
The remainder of this article is devoted to a pragmatic overview of six key challenges that are currently affecting and potentially reducing the effectiveness of specialized talent recruitment efforts within the financial services and investment management industry. For each of these challenges, one or more solutions will be described.
1 — Investment Management Recruiting Challenge: Competition in All Forms
The specialized talent actively targeted by human resource professionals and C-level executives within the investment management industry are constantly being recruited by companies inside and outside the industry. For example, IT experts needed by investment management firms are also in demand within multiple industries that have little in common with the financial sector.
Whether the career choices involve financial firms or high-tech companies, the competition is intense. The ongoing competitive factors also spill over to the monthly and annual performance of recruitment and executive search firms serving the investment management industry. The intense competition for specialized investment management talent is reflected in stark terms by how well recruitment firms perform under intense competitive pressure for their clients. In reality, the list of successful recruiting experts for the investment management industry is a short one — a handful at best.
In past years, many investment management companies probably chose a Big Four accounting firm to help with recruiting projects. However, recruiting success does not always come in a big package and large accounting firms are no longer being chosen by default to help with something as specialized as investment management recruiting. It is worth noting that the Big Four was originally the Big Eight (more than 30 years ago) and then the Big Six before becoming the Big Four (about 20 years ago) in large part due to intense competition.
- The Investment Management Recruiting Solution — Use recruiting experts with a proven track record of finding and hiring specialized investment talent. Whenever possible, choose a recruiting partner that works exclusively in the investment management and financial services sector. Investment management is a niche business that deserves a similar niche focus in recruiting efforts.
GoBuyside is the primary example of a niche recruiting firm that meets and exceeds the standard in the above-suggested solution. Based in New York, this firm has a global presence with 400 clients based in 15 countries and 50 cities. As an illustration of how GoBuyside handles competition, a client had this to say:
“We were looking for junior finance and consulting talent in our business development and M&A departments. We tried multiple sources and GoBuyside blew them all out of the water. GoBuyside’s network effect and ROI were evident within a week” (Fortune 500 Company with multiple global and US offices).
2 — Investment Management Recruiting Challenge: Networking Difficulties
Whether recruiters admit it or not, it is increasingly hard to network successfully in a social media and digital world. Being friends on Facebook or a follower on Twitter does very little in converting an individual to a new hire in the investment management world.
Of course, many organizations are struggling with coping with a digital revolution. But a common theme is gradually becoming more visible — many successful entrepreneurs spend less time instead of more on social media platforms. Successful time management in investment management recruiting requires a stern discipline about how to spend time and attempting to network via social media platforms is emerging as a losing strategy.
The recent privacy issue, prominently illustrated by social media platforms such as Facebook, is another serious impediment to investment management recruiting efforts that depend on social media. The immediate backlash has produced a popular movement that includes technology pioneers like Steve Wozniak advocating that social media users find another path that does not misuse personal data.
- The Investment Management Recruiting Solution — Choose recruiting firms that do not rely on networking to do the heavy lifting. Customer-centric communicating and innovating are superseding networking as a winning strategy within today’s successful investment management recruiting companies. Just as inbound marketing has replaced old-fashioned marketer-centric sales processes like cold calling, the art of customer-centric communication and sales processes has replaced old-fashioned networking.
This is what Arjun Kapur, the founder and Managing Partner of GoBuyside, thinks of social media:
“I avoid social media and am not an active user of any platform. I constantly think about my clients’ businesses and their market environments. Where is the commoditization occurring in their business models? What are their pain points and potential opportunities? I feel this helps me think about how to position my business and where to spend time innovating internally.
LEARN MORE ABOUT ARJUN KAPUR ON INSPIRERY.COM
3 — Investment Management Recruiting Challenge: Diversity and Inclusiveness
This challenge is almost certainly more difficult to overcome than it initially appears for most investment management organizations. The need for diversity in the workforce has been an important and visible employment goal for several decades while inclusiveness (ensuring that all employees are provided access to the same opportunities) is a more recent workforce factor.
Viewing the goals of inclusion and diversity together enhances the challenge to a point that many companies probably flunk the test. The title of a 2014 Harvard Business Review article by Christine Riordan describes the problem: “Diversity Is Useless Without Inclusivity.” While changing how investment management employees are recruited and hired will not fix all aspects of this problem for any employer, improving a company’s recruiting practices to emphasize diversity and inclusion deserve serious consideration as part of a viable solution.
GoBuyside Highlights the Rising Importance of Technology in Talent Recruitment and Selection https://t.co/iDAwY7PfSO
— GoBuyside (@gobuyside) April 6, 2018
More than the other challenges discussed here, solutions for improving inclusiveness and diversity are often treated very differently in private discussions than they are in public forums, annual reports, and press releases. A healthy dose of due diligence is required before concluding that an investment management recruiting firm can help clients like Fortune 500 companies and investment managers improve diversity and inclusion efforts.
- The Investment Management Recruiting Solution — Select investment management recruiting partners that have a clear understanding of this challenge and can display tangible evidence of underlying recruiting principles reflecting inclusion and diversity. When this solution is viewed in tandem with the previous solution (networking difficulties), the recruiting strategy reinforces the value of avoiding the classic “old-boy network” that is infamous for fostering exclusion and lack of diversity by an excessive focus on existing personal and social media relationships.
GoBuyside exemplifies a recruiting partner that enables unrestricted diversity and inclusiveness. GoBuyside is the largest investment management talent platform in the United States. The company’s talent resources exceed 100,000 individuals from hundreds of cities throughout the world.
4 — Investment Management Recruiting Challenge: Disruptive Technologies
This is another recruiting challenge that represents multiple fronts. On one front, the financial services and investment management industry needs to overcome a reputation for continued use of legacy and vintage technologies. The industry is rarely ahead of the curve when it comes to groundbreaking technology that is disruptive and innovative.
On another front, the investment management recruiting process is not meeting the ambitious expectations of industry executives and human resource professionals. But in many circles, recruiting strategies remain unchanged. New problems require new solutions rather than applying obsolete solutions and that epitomizes the need for disruptive technology when attempting to solve current investment management recruiting challenges and problems.
- The Investment Management Recruiting Solution — To pay proper attention to the need for both employing and overcoming disruptive technologies, find an investment management recruiting partner that is committed to new and disruptive technologies as an integral part of their search process. Be prepared for finding only one or two recruiting experts that can successfully pass this test.
GoBuyside is a current example of a recruiting firm that consistently disrupts the traditional search model for investment management specialists. This is proving to be a successful strategy for all parties as reflected by this feedback from a client:
“We utilized GoBuyside in tandem with another recruiter our first year. GoBuyside immediately showed us value as our four hires that year all came through the platform. We have utilized GoBuyside exclusively ever since” (Middle-market private equity firm with $1 billion in assets under management).
5 — Investment Management Recruiting Challenge: Shifting Skill Requirements
The speed of change is an ongoing recruiting challenge for investment management companies, current employees, and prospective new hires. This challenge is inextricably tied to the “disruptive technology” challenge just discussed — when technologies are disrupted, the new skillsets needed are likely to be a shocking contrast to the current skill requirements.
Because technology plays such a prominent role in recent business success stories, it is not surprising that many investment management executives expect significant competitors and threats to emerge from the technology sector. Based on these external forces as well as internal industry trends, the net result is an expectation that the investment management and financial services industry will be materially disrupted during the next 5-10 years.
To successfully respond to these somewhat uncertain future challenges, recruiting a more flexible and skilled workforce is one prudent strategy. These prospective new employees will require a “hybrid” skillset that blends traditional investment management skills with digital expertise and emerging technologies. As observed by Ross McEwan, Group Chief Executive of RBS, “The change that our people will go through over the next five years will, I suspect, be even greater than the huge change our business has seen over the last five years.”
- The Investment Management Recruiting Solution — One way to cope with this imposing recruiting challenge is to work with a recruiting partner that can successfully recruit investment management specialists who display hybrid skillsets. Ideally, the recruiting expert can also provide help with immediate specialized training and retraining that will be increasingly required for a current workforce facing sudden disruption due to competitors, industry regulation, changing customer expectations and new technologies.
GoBuyside provides a unique and popular recruiting service that is well-suited to helping investment management companies cope with the challenge of shifting skill requirements. In addition to recruiting for permanent positions, GoBuyside helps client companies to find short-term talent for part-time consulting engagements.
6 — Investment Management Recruiting Challenge: Rigid Regulatory Climate
The strict regulation and licensing requirements within the financial services and investment management sector make the industry distinctly different from most other industries. To add to an already steep challenge, the rigid international regulatory climate is also changing frequently. Even when the guidelines, laws, and rules remain unchanged in one country, the regulatory climate is simultaneously shifting in multiple countries.
The mindset required to thrive and succeed in this high-pressure and volatile climate was captured in a bestselling book by Tom Peters, Thriving on Chaos. While investment management executives have an intimate understanding of the delicate balance required when faced by both rigid regulations and the need for flexibility, generalist search firms will often overlook the unique recruiting aspects of this challenge.
The significant challenges faced by investment management companies in recruiting top specialists have also dissuaded most external recruiting experts from specializing in this niche industry. There are several practical reasons for this lack of interest. It is often the hard work required to produce successful results that discourages many recruiting companies from making a serious effort with organizations like hedge funds and private equity firms. But the tight regulatory environment is consistently a factor that keeps most search firms on the investment management recruiting sidelines.
- The Investment Management Recruiting Solution — Recruiting partners for investment management and financial services firms should match the specialization of their clients. A generalized approach to search and recruitment will not get the job done. By limiting recruiting alternatives to niche specialists working only within one industry, investment management companies will end up with a laser-focused shortlist of qualified candidates.
GoBuyside is the market leader in exclusively providing recruiting solutions to the investment management sector. Their specialized and targeted approach consistently produces successful results like this:
“GoBuyside provides vetted access to all the top banking, consulting and investing candidates across the world. As the Head of Human Resources at my firm, I can confidently say that there is nothing else our recruitment team needs” (Mega-fund private equity firm with $15 billion in assets under management).
The need for diversity in the workforce has been an important and visible employment goal for several decades…
One More Investment Management Recruiting Impact to Consider — The Bottom Line
When investment management firms implement more effective recruiting solutions, the primary positive outcomes include preventing, eliminating and resolving a long series of recruiting challenges such as the six noted in this article. However, improving the bottom line is a significant bonus that can also accrue by successfully handling these serious recruiting challenges.
In an era of tight budgets and cost-cutting, reducing recruiting costs is a happy ending for all parties. Here is an example:
“GoBuyside lowered our annual recruiting costs by over $800,000. Over time we have allocated part of these resources to hiring Human Resources personnel as well as increasing compensation” (Long/short equity hedge fund with $10 billion in assets under management).
Final Observations — Investment Management Recruiting Solutions
Some firms within the financial services and investment management industry have already found effective solutions such as those noted in this article. While the challenges summarized above are indeed serious impediments to effective recruiting of investment management specialists, these problems are all solvable or preventable. After hiring GoBuyside, one client made the following observation:
“We had a longstanding relationship with a recruiting firm and unsuccessfully engaged them on a retained search for 60 days prior to utilizing GoBuyside. Within 10 days, GoBuyside closed our search” (Credit hedge fund with $2 billion in assets under management).
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In a competitive financial world where “Timing is everything” for busy CEOs and CIOs, it is time for investment management executives who are still unhappy with old solutions and lackluster recruiting results to explore new solutions. GoBuyside is successful in part because the company is a 21st-century recruitment platform (established in 2011) with talent resources encompassing 10,000 firms and 500 cities. GoBuyside specializes in working with all investment management enterprises. The company’s clients include private equity firms, hedge funds, and Fortune 500 companies.
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